Pros and Cons of Doing Business in Mexico

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For those looking to expand their business globally, Mexico presents a lot of opportunities: A competitive market, stable political and macroeconomic environment. `Ranking 15th in the list of global economies, Mexico is also the gateway to the other Latin American countries from a business standpoint. 

The vibrancy and diversity of Mexican culture, its history, culinary traditions, rapid urban growth, and development make it a very lucrative place for tourists and investors. In this article, SERVIAP lists the pros and cons of doing business in Mexico to give you a head start.

Why do Business in Mexico? 

Mexico is the second-largest economy in Latin America and is predicted to eclipse the GDP of most European nations by 2050. Globally, it ranks 60th in terms of ease of doing business, and second within Latin America (after Chile). Geographically, it is close to the world’s biggest consumer market, the US, and its own consumer population is around 120 million. 

business in Mexico

Mexico’s tertiary sector is the largest contributor to its GDP; retail, wholesale trade, and real estate services each account for about 10% of the total GDP, followed by transportation (6.5%) and financial services (4%). Mexico receives robust global investment, where the USA accounts for 43% of the total Foreign Direct Investment, with financial and trade services receiving the second-most capital. All these factors position Mexico as one of the most sought-after destinations for doing international business. 

The Main Advantages of Doing Business in Mexico

To make investing in Mexico more lucrative, the Mexican government has developed its infrastructure and particularly focus on the transportation, telecom, and energy sectors. 

Pros

  • Mexico has 11 free trade agreements with 44 countries – more than any other country in the world. 
  • Mexico is directly linked to the consumer economies of north and south America. Additionally, within Mexico, at least 53 million consumers have access to the web who are willing to spend their money on goods. 
  • There is a favorable capital potential in Mexico, the country is ranked 11th globally for providing credit opportunities to new international businesses. In addition, the currency is weaker, which gives you a higher purchasing power for your venture or for reinvestment within the country. 
  • The United States Mexico Canada Agreement (formerly NAFTA) – a trading agreement between the USA, Canada, and Mexico – is expected to provide high stability to automobile, electronic, and energy industries among others in Mexico. 
  • Mexico offers access to a skilled workforce, with a competitive cost of labor. There is a large number of workers within the STEM fields and the average wage within Mexico is comparable to that of China. The advantage here is that with a trusted PEO service like SERVIAP, you can hire a workforce that will work in a similar timezone. 

What challenges will I find when doing business in Mexico?

Doing business in Mexico will also have challenges. Though starting a business has been made easy over the years, you can still find some procedures complicated. There are certainly some drawbacks, which may put your business at risk. 

By working with SERVIAP as your employment partner, you can circumvent most the risks below

Cons

  • Building the infrastructure for your business can be tough. Dealing with property permits and registration can take up to two months – twice the time it takes in developed countries. Moreover, Mexico ranks 92 globally when it comes to the ease of getting electricity. 
  • Processing taxes is surely a difficult and arduous process in Mexico, the country has the second most complicated Tax Law in the world. Filing for social security and VAT, and then filing for tax returns can take up a very sizeable chunk of your time. 
  • In Mexico, enforcing contracts can take up to 13 months, and within this process, there are 38 procedures to follow. 
  • Typically, the culture of decision-making is slow and concentrated in the hands of higher-level stakeholders. The business meetings are not typically swift, and the important agenda is usually held off until the end of the discussion.  
  • The situation in Mexico vis-a-vis crime and corruption is less than ideal. When beginning your business, you must be mindful of who you’re making connections with. Bad associations can also taint the image of your business and cause complications with the government. 
  • It is essential to use Spanish in all communications. The people prefer their own language, and you may find it difficult to access resources or engage in meetings in other languages. Professional-level English is hard to find, especially in the public sector. 
Why expand business in Mexico

However, these are challenges you can tackle by hiring local resources who know the official (and unofficial) framework, the language, and the law. SERVIAP is the reliable local employment solution can help you navigate through these cons and make your business-doing in Mexico truly easy! By having us as your partner, you avoid the need to incorporate. We will hire your employees for you through us.

Legal Information to Consider 

Though foreigners can own 100% of a Mexican corporation or start a business in Mexico, there are still some important things to consider from a legal standpoint. The Mexican law does not favor a Mexican-owned business over a foreign-owned business. However, it is important to research the legal framework of Mexico in advance.

  • Instead of a common-law tradition (for example in the USA), Mexico follows a civil law tradition, where codified laws are used to make decisions, and penalties are supposedly pre-determined. 
  • To navigate through the legal process of Mexico, you can only hire Mexican local attorneys, many of whom may not have strong English skills
  • Insurance is an important matter to be considered and covered when doing your research, as Mexico does not recognize US or Canadian insurance documents. Hiring a service that can assess your coverage and risks is a crucial step for you. 
  • Mexico is working to update its Labor Laws and align them to those of the USA. For example, it is looking to reform “Protection Agreements” which will make companies significantly employee-friendly. 
  • If you’re not residing in Mexico, you have to make a declaration of it before starting your business in the country. 

Conclusion

If business expansion is on your mind, Mexico should be high on your list of countries to consider. It has considerable advantages over Asian counterparts such as India or China, chief among them being neighbors to the most powerful economy on Earth. With a vibrant culture, diverse and skilled workforce, the pros of doing business in Mexico are strong. The cons of expanding to Mexico can be all be handled by hiring local knowledge resources through SERVIAP. 

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